Correlation Between Industrial and Shenzhen

Can any of the company-specific risk be diversified away by investing in both Industrial and Shenzhen at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Industrial and Shenzhen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Industrial and Commercial and Shenzhen AV Display Co, you can compare the effects of market volatilities on Industrial and Shenzhen and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Industrial with a short position of Shenzhen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Shenzhen.

Diversification Opportunities for Industrial and Shenzhen

0.75

Correlation Coefficient

Industrial  Shenzhen

Poor diversification

The 3 months correlation between Industrial and Shenzhen is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Shenzhen AV Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen AV Display and Industrial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Industrial and Commercial are associated (or correlated) with Shenzhen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen AV Display has no effect on the direction of Industrial i.e., Industrial and Shenzhen go up and down completely randomly.

Pair Corralation between Industrial and Shenzhen

Assuming the 90 days trading horizon Industrial is expected to generate 1.13 times less return on investment than Shenzhen. But when comparing it to its historical volatility, Industrial and Commercial is 3.02 times less risky than Shenzhen. It trades about 0.09 of its potential returns per unit of risk. Shenzhen AV Display Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,607  in Shenzhen AV Display Co on September 13, 2024 and sell it today you would earn a total of  830.00  from holding Shenzhen AV Display Co or generate 31.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Industrial and Commercial  vs.  Shenzhen AV Display Co

Industrial and Commercial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen AV Display

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen AV Display Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Shenzhen

The main advantage of trading using opposite Industrial and Shenzhen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial position performs unexpectedly, Shenzhen can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Shenzhen will offset losses from the drop in Shenzhen's long position.

The idea behind Industrial and Commercial and Shenzhen AV Display Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Content Syndication module to quickly integrate customizable finance content to your own investment portal.